Oil prices won't go down forever: Buy Devon Energy (DVN)

Back in July, as oil approached its zenith, I cautioned that the bubble in energy stocks was beginning to resemble previous bubbles, such as the ones that sent semiconductor stocks to the moon in 1999 and 2000, and homebuilding stocks in 2005.

At a time when others were buying anything associated with oil, I suggested that investors take profits instead.

In August I wrote about oil and gas exploration firm Devon Energy (NYSE: DVN). The company had just announced quarterly results, which were ahead of estimates, and its shares soared that day to $91 per share.

I made the incredibly astute prediction that there were only two directions for the stock to go: up or down. Basically I stated that if your opinion was that oil demand will continue to outstrip supply, buying Devon made sense.

My own personal belief was that oil was trading at speculative levels, demand destruction would occur in short order with $4-per-gallon gasoline, we'd begin conserving and our massive investments in alternative energy would eventually result in supply outstripping demand.

Even without demand destruction fundamentals suggesting that the price per barrel of oil should have been well below $100, Devon was a stock to sell in my opinion. In fact, the article was titled "Avoid Devon Energy Like the Plague."

Fast forward to today. Oil collapsed beyond what I had even expected and Devon shares fell in parallel. At its lows, DVN hit $54 and change.